Stock Performance and BoFA Downgrade
Nestle India shares faced a sharp decline on April 2, 2025, slipping up to 3.67% to reach an intraday low of ₹2,150, bringing it closer to its 52-week low of ₹2,115. The stock’s downturn followed reports that global brokerage firm BoFA Securities downgraded Nestle India from a ‘Neutral’ rating to ‘Underperform,’ though it retained the target price at ₹2,140. At the time of publication, Nestle India was the worst performer on the 30-share BSE Sensex.
BoFA analysts cited the company’s high valuation compared to its growth outlook and peer group performance as key factors for the downgrade. Currently, Nestle India holds a price-to-earnings (PE) ratio of 63.07. Analysts have adjusted their earnings forecast downward by 3-5% due to recent market trends and rising costs. While a slight volume recovery is expected owing to a low base, overall growth prospects remain constrained. Additionally, analysts predict significant changes in Nestle’s portfolio over the next three to five years, emphasizing the need for the company to bridge portfolio gaps and align with evolving consumer demands.
Investment Strategies and Market Positioning
Despite the downgrade, Nestle India continues to focus on long-term growth strategies. A previous report by domestic brokerage firm Geojit, dated February 20, 2025, highlighted the company’s substantial investments in capacity expansion since 2020, particularly in Maggi, coffee, and chocolate. These expansions aim to bolster Nestle’s long-term volume growth.
Nestle’s RUrban strategy, designed to strengthen its rural market presence, focuses on optimizing outlet distribution to increase product penetration, diversify price points, and boost purchase frequency. Geojit remains optimistic about Nestle’s future, maintaining a ‘Hold’ rating on the stock with a revised target price of ₹2,390, based on a projected 57x FY27E P/E. Key growth drivers include premiumization, research and development investments, new product launches, digital sales channels, and geographical expansion.
Q4FY25 Expectations and Market Trends
Ahead of its Q4FY25 results, a report from Nuvama anticipates Nestle India’s shares consolidated revenue to grow by 5% year-on-year (YoY), an improvement from 3.9% in Q3FY25 but lower than the 9.3% growth seen in Q4FY24. Domestic sales are projected to rise by 5-6% YoY, while volume growth is expected to be around 3%. Urban demand has shown a slight recovery, though a broader slowdown persists.
Export revenue is forecasted to grow by 7% YoY, significantly lower than the one-off 21.2% growth in Q3FY25 and the 19% increase in Q4FY24. Additionally, Nestle India shares is expected to implement gradual price hikes of approximately 2% in Q4FY25, primarily in the coffee segment. The company recently raised the price of its 70gm Maggi pack from ₹14 to ₹15.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is predicted to increase by 2.6% YoY, supported by a high base. However, gross and EBITDA margins are expected to decline by 20bps and 59bps, respectively, due to inflationary pressures on key raw materials like cocoa, coffee, and palm oil. Analysts foresee an improvement in demand trends by Q2FY26 as the urban slowdown gradually eases.
As of 12:02 PM, Nestle India shares were trading at ₹2,199, down 1.48% from the previous session, while the BSE Sensex was up by 0.51%, trading at 76,408.67 levels.
